Insurance is a business of protecting and helping after the occurrence of an accident, loss or tragedy. In the event of an accident or loss, a policyholder or a third-party claimant can obtain payments or benefits, as provided in an insurance policy, by filing an insurance claim with the issuing insurance company. Many insurance companies employ certain third parties or TPAs to handle insurance claims, including tasks such as verifying the amount of the claim to be paid and ensuring that the claim is timely paid.
TPAs provide skill and cost efficiencies for insurance companies, but can introduce delays in claim resolution and unwanted complexity in claim reconciliation. In particular, problems can arise in transferring funds from an insurance company to a policyholder through a TPA-administered escrow account. The most common problems relate to timing issues, where insurance company money is advanced to a non-insurer-owned escrow account and then remains in the account. Representative problems include undue exposures to bank capitalization risks and to risks of garnishment or seizure related to TPA financial exposures, and also include opportunity costs imposed on the insurer by reduced cash liquidity. Additionally, TPA ownership of escrow accounts complicates insurer participation in a “positive pay” type process for disbursing funds to claimants. However, insurer ownership of escrow accounts comes with its own problems, including challenges of real-time transaction and balance tracking and reconciliation. Accordingly, it is desirable to have a system for handling third-party-administered insurance claims, wherein insurance company money can be held in an insurer-owned account and can move promptly to policyholders on resolution of a claim.